The price of Bitcoin has risen by 71.9% this quarter, surpassing all other asset classes, according to a recent report by NYDIG. This surge occurred despite US regulators cracking down on activity in the space, bringing enforcement actions and the threat of more enforcement against many industry players.
Bitcoin’s Performance Review
The banking crisis in regional banks across the US contributed to Bitcoin’s performance, as faith in the traditional banking system was called into question. Although other assets such as stocks, bonds, gold, and commodities were up, none came close to Bitcoin’s growth.
Bitcoin’s fourth-best first quarter ever could be a good omen for the rest of the year, as it has never had a down year following a positive first quarter.
This quarter, correlations between BTC and “risk-on” assets like US stocks have steadily declined. Correlations with gold have increased in the last few weeks as the banking crisis highlighted the need for stores of value outside of traditional financial systems. However, Bitcoin’s correlations with the US dollar remain negative but rose during the quarter.
In January, Ordinals was launched, allowing users to create non-fungible tokens (NFTs) natively on Bitcoin’s blockchain. Its popularity sparked an important philosophical discussion on how the blockchain should be used. The increased data transmission and storage caused by NFTs have caused transaction fees paid to miners to rise.
The first quarter banking crisis resulted in the wind-down and receivership of two important cornerstones of the digital asset ecosystem, Silvergate Bank and Signature Bank, respectively. Both banks had real-time settlement networks that were heavily utilized by trading firms and other digital asset service providers to move funds 24/7 efficiently.
The loss of these crypto-friendly banks and the well-publicized loss of banking relationships by several other digital asset service providers sparked industry fears of a coordinated attack by banking regulators on crypto.
However, despite the challenges that Bitcoin and the wider crypto industry face, the surge in Bitcoin’s price this quarter demonstrates its resilience and growing adoption into traditional portfolios. Its low correlations with other asset classes remain a significant advantage over the long term.
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